Sell Your Property and Buy Resource Stocks

A financial crash is coming to a house near you.

While we’re not there however, the property market is fast approaching bubble territory.

On this topic, I’m sure that some of my colleagues (Phil Anderson, Terence Duffy as well as Callum Newman) over at Cycles, Trends and Forecasts may disagree with me! The team of property bulls do make some solid arguments, pointing towards an additional 15-year rally in property costs. If you ask them, we’re nowhere near the top in real estate.

Admittedly, they could be right. This is why I don’t ignore what they have to say. And neither should you. I suggest checking out what they’re saying here.

That said, having done my research around the property sector, I’m not about to run out and buy an investment property.

Here’s why…

Australia’s property market right now worth $6 trillion!

A good place to start is questioning whether home has already peaked. In some Aussie states, it appears so.

Looking from Perth, in a clear sign that the mining boom is over, the actual June REIWA figures show that the actual medium house price rests around $530,000. Prices possess crashed by $20,000 on average in the last six months.

While you don’t want to maintain Perth property, it’s another story over in Sydney and Victoria. The average house price has reached the $1 million tag in both states. And, according to the Australian, the good times may be over:

‘Amid booming prices in Sydney and Melbourne, regulators possess in the past year grown increasingly concerned that lending standards are slipping, as banks battle to lend and purchasers take advantage of record low interest rates.

‘In December, the Australian Prudential Regulation Expert stepped in and told banks to limit financing growth to property investors in order to 10 per cent a year…

‘Despite the banks continuous shrill of super-safe housing, APRA have thoroughly dismissed this given the major banks all failed the APRA November 2014 mortgage stress tests. And in May APRA highlighted severe deficiencies in bank housing lending credit underwriting standards.’

Indeed, the brakes take presctiption with bank lending. Which is a cause for concern.

The whole property market is built on the premise that the lending as well as leverage will continue forever.

Unfortunately, it is unrealistic to expect debt to develop forever.

Eventually, the system requires a main restructuring to grow again. This is not rocket science. The editors from Port Phillip Publishing have argued for years that the increasing global debt load is totally unsustainable.

With limited economic growth as well as deflationary conditions, it’s likely that the debt period will blow up soon. So when the overleveraged system goes down the actual drain, this won’t be good news for property prices.

The Book Bank of Australia’s Governor, Glenn Stevens, is also concerned. He said?that he was ‘concerned about Sydney‘ house prices,?which he described as ‘crazy‘ in June.?This week he or she backed up his view through saying that ‘dwelling prices continue to increase strongly in Sydney‘. And that the actual RBA is working to?’assess and contain risks that may arise in the housing market‘.

Given the extraordinary financial debt levels, authorities are even beginning to look at regulating negative gearing. Doctor Luci?Ellis, the?RBA’s?head of monetary stability,?told a Senate economics committee inquiry in to home ownership on Tuesday,

‘The combination of negative gearing and concessional taxation of capital gains creates an incentive which makes people more comfortable about taking on leverage… It’s worthy of a holistic review.’

At the end of the day, it’s really easy…

Increasing regulation and slowing lending growth are ominous signs for the housing sector. And when these measures go ahead, the knife will be put to the property bubble.

And if you didn’t know, 60% of Aussie wealth is tied to the property sector. This compares to the global average of 45%. Then when, and not if, property prices crash, household wealth will require a huge hit.

The property maximum is approaching

We’re also facing the biggest financial crash of our life span — the sovereign debt crisis. This is the real trigger for the fall in property prices. Don’t just take my word for this…

Doug Casey, from Casey Research, has been saying this for years now. Martin Lance armstrong, Chairman of Princeton Economics International, started warning concerning the coming ‘Big Bang’ back in 1985! And our founder, Bill Bonner, continues to be warning about financial systems flaws and faults since, well, before I was born!

The sad fact is that no one concentrates.

Unfortunately they will hear it when the bond bubble pops…and the majority of overleveraged products collapse. And this includes property prices.

Don’t be the last one standing

Already, the smart money is getting out…

Billionaire James Packer just sold his mansion for $70 million, breaking the all-time report. This kind of activity typically occurs at the top of the market.

And my close friend’s dad, a multi-millionaire in the Victoria property development space, is about to sell all his qualities. When the smart money is getting out like this, you don’t want to be the last one standing.

You need to look after yourself.

The best way to do this is by shifting your money into quality resource stocks. Compared to property, they’re dirt cheap. And when resources rebound, as I’m sure they will, you stand to make a tidy revenue. But you have to play your own cards right, buying into the right sectors…at the right time.

If you would like more information on how to best play these types of markets, you can start here.

Regards,

Jason Stevenson,

Resources Analyst, Resource Speculator

From the Port Phillip Publishing Library

Special Report: Nitro Stocks Completely unknown to most Aussie traders, there is a special type of ASX investment that can generate more cash in a week than most people earn each year! They’re called ‘Nitro stocks’ and they can cram 20 or 3 decades of market profits in to just a few months. Sam Volkering states, ‘It’s like taking a slow-moving bluechip and pumping it full of steroids!‘ Sam’s noticed three stocks on the verge of hitting their ‘Nitro-phase’. And if you want in, you’d better hurry!